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Glossary of Compensation Terms

GLOSSARY 

TERM 

   DEFINITION 

Base Pay 

 

 The fixed compensation rate paid to an employee for performing specific duties. (It does not reflect extra pay such as shift premium, call pay, or overtime.) 

Benchmark Job

 

 A job that is common in the external market and used to make salary comparisons either within the organization or to similar jobs outside of the organization. 

Compa-Ratio 

 

 Compa-ratios are used to measure and monitor an individual's actual rate of pay to the midpoint or control point of their salary range. It is a useful gauge for leaders to use in assessing experience versus salary level, the magnitude of salary adjustment, etc. Compa-ratio is determined by the following formula: current base salary (based on 1.0 FTE) / midpoint of the salary range. 

Example: a full-time employee in grade 8 has a base salary of $35,000 per year. 

  $35,000 / $46,500 = 0.75 

  • A compa-ratio of < 1.0 indicates that the salary range is less than the midpoint. 
  • A compa-ration of > 1.0 indicates that the salary range is greater than the midpoint. 

FTE 

 

 FTE stands for “full-time equivalent”. This is an index to compare full-time employees (1.0 FTE) to part-time employees (< 1.0 FTE). The value for part-time employees: number of hours scheduled to work / 40 hours. 

 Example:  if an employee is scheduled to work 20 hours per week, they are 0.5 FTE: 

 20/40 = 0.5 

Internal Equity

 

 The relative relationship of employees’ salaries to one another within similarly situated positions, based upon experience, performance, etc.  

Pay Compression 

 

 Pay differentials too small to be considered equitable. The term may apply to differences between 1) the pay of supervisors and subordinates, 2) the pay of experienced and newly hired   personnel of the same job, and 3) pay-range midpoints in successive job grades or related grades across pay structures. 

Pay-for-Performance 

 

 The practice of using pay to manage and motivate performance. Pay-for-performance links pay (base and/or variable), in whole or in part, to an individual, group, and/or organizational performance. 

Pay Grade 

 

 A group of jobs of the same or similar value, used for compensation purposes. All jobs in a salary grade have the same salary range: minimum, midpoint, and maximum. The grade assignment for a job is determined through a job evaluation process which includes both internal and external comparator information. 

Salary Range Maximum 

 

 The highest level of pay for a position based on its assigned pay grade within the university’s pay structure. Pay at this level is intended for employees whose performance levels consistently exceed most position requirements.

Salary Range Midpoint

 

 The middle point between the minimum and maximum of the salary range. This value typically represents the market value or “going rate” for a highly competent, seasoned employee with advanced proficiency and a history of sustained strong performance.

Salary Range Minimum 

 

 The rate paid to an employee who possesses the minimum qualifications of the position and who is expected to be able to perform the basic duties and responsibilities of the position. 

Salary Range Progression 

 

 The position of the employee’s pay level within the pay ranges; the ability for pay movement or progression is based upon performance. 

Total Rewards 

 

 The monetary and non-monetary returns provided to employees in exchange for their time, talents, efforts, and results. Total rewards involve the deliberate integration of five key elements that effectively attract, motivate, and retain the talent required to achieve desired business results. 

Quartiles 

 

 A distribution divided into fourths (e.g., the pay range). The first quartile corresponds to the 25th percentile, the second to the 50th percentile, the third to the 75th percentile, and the fourth to the 100th percentile. 

Variable Pay 

 

 Compensation that is contingent on discretion, performance, or results achieved. It may be referred to as pay at risk.